MITIGATION • Maintain a comprehensive liquidity risk policy and limits based on best practices. • Proactive monitoring, analysis and reporting to ensure the management of liquidity risk is within the approved Risk Appetite. • Liquidity risk controls are reviewed regularly to ensure effective management of this risk factor. • Proactive review of all liquidity risk parameters in line with the Group’s business strategy, regulatory requirements and current economic environment. • Preserve high quality liquid assets and well-diversified sources of funds as liquidity risk buffer under both business-as-usual (BAU) and stress conditions. • Conduct regular and ad-hoc stress testing to identify possible liquidity strain and to ensure the Group’s exposure remains in accordance with the Group’s risk tolerance. • Establish robust liquidity crisis management plan and viable contingency funding plan. • All exposures and non-compliances are promptly reported to Management & Board Committees. MITIGATION • Maintain and actively manage operational risk in line with the Group’s operational risk policy and approved Risk Appetite. • Embedded Risk Units are established within significant activities and risk controllers are appointed in every division to enhance and ensure active monitoring of operational risks in the Group. • Proactive review and management of critical business functions and essential services to ensure timely recovery in the event of disruptions. • Various ORM tools, comprising proactive and reactive tools, are applied to provide a robust and consistent approach in managing Group-wide operational risk. • All operational risk issues and incidents are reported to Management and Board Committees with detailed root cause analysis and action plan. • Conduct operational risk training and awareness to ensure continuous development in building strong Group’s risk culture. 3 4 LIQUIDITY RISK OPERATIONAL RISK DEFINITION Risk of adverse impact to the financial condition of the Group, or the soundness of the Group being adversely affected by an inability (or perceived inability) to meet its contractual obligations. DEFINITION The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, which includes legal risk and Shariah Non-compliance risk but excludes strategic and reputational risks. Bank Islam Malaysia Berhad 49 Management Discussion and Analysis 01 05 03 07 02 06 09 04 08
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